
The High Cost 
of Marketing. 



ADDRESS OF 

B. F. YOAKUM, 

Chairman, St. Louis & San Francisco Railroad Co., 
AT MEETING OF 

Texas Farmers' Congress 

At College, Texas, 

July 26, 1911. 



JlJL 28 1911 



The High Cost of Marketing. 



There are in Texas one and one-half 
million people engaged in producing from 
the soil. No other State in the Union is 
making such rapid headway in agricultural 
production. Therefore, Texas has more to 
gain than any other State by improved con- 
ditions in marketing. The farmers do not 
get as much as they should for tlieir prod- 
ucts, and-no one can improve this but the 
farmers themselves. According to Govern- 
ment reports, the producer receives 46 cents 
for products of the farm for which the con- 
sumer pays $1.00. It is not encouraging 
to the young farmer boys to see that out of 
every dollar being paid for the products of 
the farm their share is only forty-six cents, 
while the remaining fifty-four cents are dis- 
tributed among others before these products 
reach the consumers' tables. 

Last year's agricultural products were 
worth nine billion dollars to the farmers. 
The Government used farm values in get- 
ting figures for this total. Assuming that 
the farmers kept one-third of the products 
for their own use the consumers paid over 
13 billion dollars for what the producers 
received 6 billion dollars. The cost of 
getting the year's products from producers 
to consumers amounted to the enormous 



sum of 7 billion dollars. The real problem 
to deal with is not high cost of living. It 
is high cost of selling. 

The industrial exports are increasing over 
agricultural exports at the rate of seven to 
one, because factory products are marketed 
in a more businesslike way than farm 
products. The United States is now ex- 
porting two billion dollars' worth of goods 
a year. In the last twenty-five years our 
agricultural exports have increased sixty 
per cent., while our commercial exports 
have increased nearly four hundred per 
cent. This is certainly a bad showing for 
the farmers. It is plain that rural devel- 
opment has not kept pace with manufactur- 
ing and city growth. 

There may be many reasons for this but 
there is one which is more important than 
all others. That is our long neglect of 
the business side of farming. The late 
S. A. Knapp, who had charge of farm 
demonstration work in the Department of 
Agriculture, and who had more to do with 
the recent agricultural development in the 
South than any one man, used to say that 
one-eighth of successful farming required 
scientific knowledge, that three-eighths was 
an art and the remainder was simply busi- 
ness. The business end of husbandry has 
been sadly neglected, and that is the chief 
reason why agricultural growth makes such- 
a poor showing in comparison with other 
national development. 



The farmers of this country, to receive 
better prices, do not have to experiment 
with untried theories. They only have to 
copy what others are doing successfully. 
For instance, the people of Denmark thirty 
years ago received 12 million dollars for 
their butter, eggs and bacon. Then they 
began the organization of market societies. 
Now the same character of products brings 
in over 100 million dollars a year. Nearly 
all their dairy products are marketed through 
co-operative creameries and their egg export 
societies have 25,000 members. There is 
no such talk of high cost of living in that 
little country because they have a system 
of economical marketing. The farmers 
there have organized under trust methods. 
The commercial waste in the distribution of 
farm products is reduced to a minimum. 
They share in the profits of economical 
marketing. 

We know that all farmers are not able to 
have their own creameries. Therefore a 
community of farmers get together to build 
and operate one for the convenience and 
profit of all. The creamery is the concrete 
unit around which will be constructed the 
neighborhood co-operative market. Ad- 
vanced methods in handling the business of 
the farm are bound to come. What we 
must realize is the cost of delay. We have 
already waited too long. We should now 
work for prompt improvement in marketing 
facilities. All well managed creameries 



properly located are profitable. In most 
cases the creamery is the first step in co- 
operation or in neighborhood marketing. 
Dairying is universal and creameries are 
easy to operate. Co-operation in marketing 
firuits, vegetables, grain, cotton and other 
products is just as sure of success when 
practiced under correct business rules. A 
very little money will add to a cream- 
ery facilitiv;S for making or storing of 
ice so that it can be used by members. 
Marketing of poultry and eggs is so impor- 
tant to so many farmers that facilities for 
the handling of these products will be added 
to creameries and to other marketing plants. 

The neighborhood market house will 
become as important and as popular in 
American life as the country school house. 
Popular education has been the strongest 
force in the development of America. These 
neighborhood co-operative selling plants 
will play almost as important a part in our 
future as the free schools have in the past. 
They will be of important educational value 
as they will cause small farmers to make 
close study and application of business 
methods. 

These marketing plants will be a great 
benefit in improving methods of preparing 
products for markets. Neglect to offer 
products for sale in the most attractive and 
salable conditions is the cause of great loss 
to farmers. To illustrate, the manager of a 
dining car line told me a few days ago that 



he buys about $40,000 worth of apples and 
other fruit annually. He purchases his 
apples in the States of Oregon and Wash- 
ington, and sells them on his dining cars, 
part of which run through the Ozark 
Mountains of Arkansas and Missouri. He 
said that there are just as good apples 
grown in the Ozarks, but the owners of the 
orchards do not sort and put them up in 
as attractive packages for his dining car 
tables. Therefore, he is paying to the 
Oregon and Washington farmers high prices 
for products which the Arkansas and Mis- 
souri farmers could furnish. 

Every producer of perishable foodstuffs 
who has studied the question of cold storage 
in the interest of both the farmer and the 
public, knows that refrigeration has greatly 
benefitted the farming communities in better 
preservation and prices, enabling them to 
sell their perishable products for better 
prices, and saving them from decay upon 
their hands. Cold storage is becoming a 
matter of national importance and one of the 
subjects to which the farming interests of 
the country should give consideration. Cold 
storage is so essential that all national or 
state regulations should be carefully con- 
sidered before the enactment of such regu- 
lative laws as may be necessary to properly 
protect the public welfare. 

It will be urged by some city people that 
the development of thousands of these farm 
market places to the limit of their usefulness 



will result in damage to existing business. 
This alarm is not warranted. Commerce is 
always aided and not retarded by labor sav- 
ing machinery and reductions in cost of dis- 
tribution. Established commission houses 
will then handle and deliver for the producers 
on terms to be agreed upon. It is not pos- 
sible to foresee the extent to which these 
community marketing plants will grow and 
develop. The Rochdale weavers in England, 
in 1844, organized to buy for themselves 
small packages of tea and sides of bacon at 
lower cost and the system has extended to 
include tea plantations in Ceylon and vast 
establishments in other lines now doing a 
combined business of a-half billion a year. 
In England, Scotland and Ireland, there are 
1,500 co-operative stores with a membership 
more than twice as large as the population 
of Texas — 8 million people receiving the 
profits. They do a business of more than 
500 million dollars a year. 

American enterprise may be depended 
upon to see that progress is made in the 
right direction. These neighborhood mar- 
keting establishments will place every 
farmer with ten or forty acres on the same 
footing as another with more land and 
greater harvests. They will give to each of 
these individuals greater independence and 
their increased share in the proceeds of their 
husbandry will enable them, through 
abundant prosperity, to add to their comfort 
and contentment. 



I have little patience with the work of 
those busy people at Washington who are 
trying to find out through commissions 
and investigations as to what is best for the 
farmer. If the Government will aid in 
giving the farmer his proper share of the 
fruit of his work, so that he will be able to 
buy for himself the things which will make 
his farm home the best for his family and 
himself, then it will attempt something 
worth while. The farmer is the best judge 
of his own comforts. He will buy what he 
wants if he has the money. He needs no 
advice as to how to spend his money. 
What he wants is a systematic plan and 
aid in getting the proper price for his 
goods. 

The Government should assist in 
finding a way for better farm marketing. 
There should be a market bureau of the Ag- 
ricultural Department devoted to accumu- 
lating and distributing information on best 
methods and best markets for selling. The 
Government should spend some money to 
demonstrate proper marketing, just as it is 
doing in the development of good roads 
work. The Good Roads Department has 
been brought up to such a high state of 
efl&ciency by Mr. I,ogan W. Page, Director 
in Charge,: that it is now esimated that 
there is being spent one million dollars a 
day in the improvement of our public high-, 
ways. This is good work. The Govern- 
ment can demontrate proper market facilities 



just as it now demonstrates the values of 
different soils for production. The Govern- 
ment which maintains an expensive and 
eflScient consular service to aid our export 
trade can afford to expend a few dollars to 
better the marketing of eggs so that millions 
will not be destroj^ed every year because 
they arrive at the city market in bad or half- 
bad condition. The Government watches 
over the purity of manufactured food prod- 
ucts, and it is just as important to spend 
money to find ways and means of decreasing 
expense of distribution of products in order 
to give the user better and cheaper food, 
and the grower better and safer returns for his 
work. This market department should be 
broad enough to reach all the farmers of the 
country. The Government should systemati- 
cally trace the movement of all farm prod- 
ucts to the place of final use and give the 
country the information. It should give 
the country the benefit of a thorough in- 
vestigation of improved selling and market- 
ing systems, including all means of dis- 
tribution and handling. Results will be 
immediate. The farmer will reduce his 
selling cost when he learns in detail about 
wagon haul costs, freight charges, cold stor- 
age charges, distribution in cities, profits to 
dealers, losses through deterioration, and all 
things which enter into marketing expense. 
As the selling expense decreases so will the 
returns to the farmer increase and the cost 
of living decrease. 



8 



At present there are between 25 and 30 
investigations going on in Washington, but 
not one of them has anything to do with the 
high cost of selling table necessities. No 
one can foretell what the result of these 
investigations may be in regulating com- 
merce and co-operation. Business may be 
surrounded by such restrictions that the 
future growth of our industrial development 
may be retarded so that it may seriously 
affect the men who organize to sell agricul- 
tural products. 

Strong business combinations have grown 
up in our country, in some cases probably 
too strong for healthful conditions, but they 
are the result of the work of business men 
who have taken advantage of their oppor- 
tunities for organizing their forces and 
working for a common purpose toward good 
prices, cutting out useless expenses in dis- 
tributing their goods to the consumers. 

I do not believe in combinations of capital 
to a point of destroying competition. This 
country has made the greatest record of any 
country in the world under competitive con- 
ditions. We can go on in our development 
under the enforcement of the Sherman Anti- 
Trust Law as we now understand it, and 
which if enforced as construed by our high- 
est court will prevent any destructive work 
through any combination of interests. 

Let us see how the annual output of your 
business compares with the output of other 
industries : 



The total business of the steel in- 
dustry of the United States last year, 
factory value, amounted to. . . $550,000,000 

of oil 175,000,000 

of lumber 1,200,000,000 

of sugar..... 350,000,000 

of tobacco 175,000,000 

A total of $2,450,000,000 

while the farm value of agriculture alone 
the same year amounted to nine billion 
dollars. Nine billion dollars is a big lot of 
money. It is the one great item of our 
national resource. In connection with this 
great wealth producing business, it is cer- 
tainly conservative, jQgured from any stand- 
point, to say that on the nine billion dollar 
farm value crop the producers should 
receive two billion dollars more money than 
they are now receiving. These two billion 
dollars saved would mean to the farmers 
a two billion dollar saving on a nine 
billion dollar crop. When we discuss 
figures so large they become mystifying. 
The two billion dollars we could save by a 
system of going more direct from the farm 
to the consumer nearly equals the factory 
value of all steel, lumber, oil, sugar and to- 
bacco sold in the United States last year. It 
is more than the combined revenues of 
France, Italy and Germany. It is more than 
double the yearly cost of running our own 
Government. It means to the farmers a divi- 
dend of more than two dollars for every min- 
ute that has passed since the birth of Christ. 



ID 



These strong so-called trust organizations 
have taught us a lesson of distribution. They 
have shown us that one executive head can 
direct the distribution of a commodity where 
under old methods it required hundreds of 
men. Twenty years have changed our entire 
system of distribution through organized 
business combinations, except farm products 
which are not handled under organization 
until after they are sold bj- the producers. 

Farmers are beginning to apply the meth- 
ods of successful business institutions in the 
distribution of their products. Some of these 
young organizations are small and some are 
large, but they are all struggling to com- 
mercialize the handling of their products. 
Within a few years we will have big results 
from organized farm marketing, and our 
farm products will be sold and distributed 
under the same general combination of inter- 
ests as other large businesses of the country 
are now handled. 

The farmers are vitally interested in 
general prosperity. They are interested in 
development and constructive legislation. 
It is to the advantage of the 30 million 
people engaged in supplying soil products 
to feed the 60 million engaged in other 
business to have these consumers able to 
feed themselves and families with three 
hearty meals a day. The producers want 
them to take big market baskets to the 
market places and carry them away full. 
The producers want the thrifty housewives 



II 



to be able to inquire at their market places 
what fresh vegetables, meats and breads 
they will have next day so that they can 
prepare wholesome and bountiful meals for 
happy, prosperous families. This is the 
way to build up strong, resolute, red 
blooded Americans and not through 
the political clap-trap of the ambitious, 
selfish politicians who are preaching new 
theories of government without a thought 
on constructive legislation. Getting back 
to my subject : Consider the difference to 
your business in feeding the balance of the 
world as to whether the hungry woman 
goes to market and must economize by 
buying half what she would like to have 
and that of the cheapest over-kept vegeta- 
bles, or whether she buys bountifully of the 
fresh and most wholesome food which you 
produce. You are therefore just as much 
interested in well-filled market baskets as 
the manufacturer is in having a strong man 
to fill each place on full time in his shop. 
If a railroad train is abandoned it means 
less coal for the railroad to buy, and it also 
means less sale of coal by the producer. 
The same principle applies to farming. 

Formerly conservation as we understood 
the term applied only to the natural conser- 
vation of coal, timber, water power and 
other resources, but it now exteuds to na- 
tions — their strength, power and health — 
and to industrial and commercial opportun- 
ities. Conservation of the agricultural 



12 



waste between the grower and the kitchen 
is of greater importance than any other and 
is the one most neglected. All farmers are 
interested in the two billion dollars of an- 
nual waste which can be turned into farm 
dividends. 

It is not my purpose to discuss Texas 
political matters, but the railroads of Texas 
are the servants of the people, and I feel 
justified in referring to one matter. The 
railroads are operated under rules and regu- 
lations fixed by the Railroad Commission of 
Texas in the interest of the public. 

Every economic waste that can be cut 
out means a step in the direction of better 
service and lower cost of transportation. 

Last season the Railroad Commission of 
Texas reduced the rate on cotton equal to 
about $750,000 on the three million bale crop. 
If the railroads had increased their rates to 
that amount, there would have been a feel- 
ing that such an advance was unfair to the 
shippers. Since this reduction in freight 
rates of 23 cents a bale, the advanced report 
of railroad operation in the State shows that 
the Texas railroads paid out on personal 
injury claims the last fiscal year over two 
million dollars. 

There is no data to establish exact sta- 
tistics, but I have made diligent inquiry, 
and from the best information obtainable 
I find that the people injured by the rail- 
roads do not receive more than one-half of 
the money paid by the railroads for such 



13 



accidents. The other half goes to lawyers, 
court costs and witnesses, instead of to the 
injured or their families. 

At any rate, it is conservative to say that 
$750,000 of these two million dollars is an 
economic waste, and the people of Texas 
are interested in all matters where money 
is unnecessarily taken from the railroads 
which are operated for the public and regu- 
lated through state agencies created by the 
people. To put it in another way, if the 
$750,000 reduction in cotton rates last year 
could be justified on its merits, and the 
$750,000 which unnecessarily went to per- 
sonal injury claim lawyers, etc., could have 
been retained by the railroads, then a reduc- 
tion of I ^ million dollars in freight rates 
could have been made with no more loss to 
the railroads. 

This large amount of money being paid 
out on personal injury claims, practically 
half of which goes to lawyers, is permissible 
under the laws as they stand today, but I 
contend that this should not be, and that 
the matter of compensation to lawyers 
handling claims against the railroads, the 
servants of the people, should be regulated 
by a fixed fee or placed under the control 
of the Railroad Commissioners to pass upon 
each case, the same as they do upon each 
case where compensation or regulation of 
the railroads is concerned. 

The earnings of the railroads of Texas 
have been reduced until they are lower than 



14 



they should be under a fair adjustment, and 
lower probably than many people think who 
do not study them. The Frisco lines in 
Texas last year earned $12.24 gross for each 
mile each day during the year, and their net 
earnings were $1.77 per day for each mile. 
The average gross earnings of all the roads 
in Texas were $18.78 per mile per day, and 
the average net earnings of all the roads in 
Texas were $4.20 a day for each mile of 
road operated in the State. 

A mile of railroad cannot be built, bal- 
lasted and equipped for less than $25,000 
or $30,000. The average net earnings per 
mile per day earned by the railroads of 
Texas is not as much as the owner of a 
good pair of mules and wagon costing 
$1,200 would feel justified in taking for the 
services of his team and driver a day, and 
these railroads cost $25,000 to $30,000 per 
mile. 

This shows clearly that the railroads can- 
not live and give the service that the public 
requires without a better net return, which 
must necessarily call for an advance in rates, 
but I would prefer to see the remedy 
accomplished as far as it can be through 
economies without hurting the service rather 
than through rate advances. 

In conclusion, I want to say that the rail- 
roads of the country are interested in pro- 
duction and marketing, and are anxious to 
co-operate with the farmers in every way 
they can towards bringing around a better 



15 



understanding and better feeling between 
the two interests, which are natural partners, 
and which should work together upon all 
questions of common interest. 

I want again to call your attention to the 
fact that the biggest trust is yet to come ; 
that is, the co-operative trust of the pro- 
ducers who raise, own and sell foodstuffs to 
the American people, with increasing ex- 
portation to other countries. 



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LIBRARY OF CONGRESS 



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